White House: Tax hike threat could hurt retailers

FILE - In this Nov. 16, 2012, file photo, President Barack Obama acknowledges House Speaker John Boehner of Ohio while speaking to reporters in the Roosevelt Room of the White House in Washington, as he hosted a meeting of the bipartisan, bicameral leadership of Congress to discuss the deficit and economy. A big coalition of business groups says there must be give-and-take in the negotiations to avoid the "fiscal cliff" of massive tax hikes and spending cuts. But the coalition also says raising tax rates is out of the question. The group doesnít care that President Barack Obama campaigned to raise tax rates on the rich. The same song is sung by groups representing retirees, colleges and countless others. (AP Photo/Carolyn Kaster, File)

WASHINGTON (AP) — White House economists warned Monday that the uncertainty of a potential hike in taxes next year for middle class taxpayers under the looming fiscal cliff could hurt consumer confidence during the crucial holiday shopping season.

In a new report that coincides with Congress’ return after the Thanksgiving holiday, the White House says that if lawmakers don’t halt the automatic increase in taxes for households earning less than $250,000, consumers might even curtail their shopping during the current holiday season.

“As we approach the holiday season, which accounts for close to one-fifth of industry sales, retailers can’t afford the threat of tax increases on middle-class families,” the report says.

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The study by President Barack Obama’s National Economic Council and his Council of Economic Advisers also says a sudden increase in taxes for middle-income taxpayers would reduce consumer spending in 2013 by nearly $200 billion, significantly slowing the economic recovery.

The figures echo estimates by private forecasters and by the Congressional Budget Office.

Congress and Obama have until the end of the year to avoid across the board tax increases that would do away with rates set during the administration of President George W. Bush and restore higher tax rates in place during President Bill Clinton’s administration when the economy was robust and the federal government had a budget surplus.

Many middle income taxpayers also would be exposed to automatic tax increases under the Alternative Minimum Tax, which is designed to guarantee a certain level of tax payment by wealthier taxpayers.

According to the report, a married couple earning between $50,000 and $85,000 with two children would see a $2,200 increase in their taxes.

Obama wants the Bush-era tax rates to remain at their current level for households earning less than $250,000. He is calling on Congress to increase taxes for families earning more than that threshold.

Obama’s plan is part of an overall deficit reduction package that would increase tax revenue by about $1.5 trillion and reduce spending by a similar amount over 10 years.

Congressional Republicans, led by House Speaker John Boehner of Ohio, have said they are open to including tax revenue in any budget package but have balked at any plan that raises tax rates on wealthier taxpayers. They argue that higher rates would also hit some small businesses.